TNB records RM2.8b in profit from IBR and forex gains

It also expects unit electricity demand growth to remain stable


Tenaga Nasional Bhd (TNB) posted RM2.76 billion in net profit over the four-month period ended on Dec 31 last year, supported by its regulated business and a foreign-exchange (forex) gain of RM329.7 million.

Under the Incentive-Based Regulation (IBR) framework, Malaysia’s largest utility provider’s regulated business contributed 44.4% of group profit for the period, mainly consisting of transmission and distribution services.

Revenue for the group — which controls approximately 56.2% of Peninsular Malaysia’s power generation capacity — was at RM15.83 billion, while operating expenses stood at RM11.14 billion.

TNB president and CEO Datuk Seri Azman Mohd said the IBR resulted in improved operational and business efficiency for the group after its successful implementation following the first regulatory period last year.

“Furthermore, the company’s stable earnings from the successful of IBR implementation is vital as it ensures that the company will be able to continuously contribute to the nation’s overall infra- structure,” Azman said in a statement yesterday, adding that the company will further look to improve contributions from its non-regulated business.

“To strengthen TNB’s non-regulated business, as well as achieve our growth aspiration, we will continue to explore and identify growth opportunities locally and abroad, which are value-acctive and able to provide favourable return for the company and our shareholders,” he added.

TNB also expects unit elec- tricity demand growth to remain stable in line with the growth in the domestic economy, while the continued implementation of the IBR is to provide better earnings predictability for the group as fuel costs are mitigated under the mechanism.

The second regulatory period for the framework will be carried out from this year until 2020.

For its revised four-month period, TNB declared a 21.41 sen dividend, or a total payout ratio of 50%, which is in line with its 30%-60% dividend policy.

“It has always been our commitment to continuously reward our shareholders through consistent and sustainable dividend payout,” TNB chairman Tan Sri Leo Moggie said in the same statement.

The four-month results reflect the company changing its fiscal year-end from Jan 31 to Dec 31.

Meanwhile, Fitch Ratings Inc upgraded TNB’s long- term foreign-and local-currency issuer default ratings to ‘A-’ from ‘BBB+’ with a stable outlook, while also upgrading the group’s foreign- and local-currency senior unsecured ratings to ‘A-’.

The ratings by the credit rating agency were based on the company’s strong state support acting as Malaysia’s electrical transmission and distribution network owner and operator, the IBR remaining intact and the consistent application of the Imbalance Cost Pass-Through (ICPT) mechanism.

As part of the ICPT mechanism, the Malaysian government will provide for RM929 million in subsidies and rebates for consumers from January to June this year, which includes subsidies of 0.28 sen per kWh of surcharge due to the additional cost of generation carried over from July to December last year and 1.52 sen per kWh to continue rebate for customers.

Fitch Ratings also expects TNB to generate RM15 billion in cashflow annually, which will help the company fund the majority of its capital expenditure estimated at RM32 billion up to August 2020.

According to the ratings agency, the company’s stand-alone credit profile is assessed at ‘BBB’.

Malaysian Rating Corp Bhd (MARC) also affirmed TNB’s corporate credit rating and sukuk rating of ‘AAA’ and ‘AAAIS’ on its outstanding RM2 billion Al-Bai’ Bithaman Ajil Bonds with a stable outlook, while maintaining the company’s AA/ Stable standalone corporate credit rating.

MARC said TNB’s credit strength reflects its “monopoly” on electricity transmission and distribution in Peninsular Malaysia and Sabah, while also accounting for its significant generation capacity and strong operational track record.